this post was submitted on 15 Feb 2024
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Mortgages are fixed income. Stock market returns are variable and therefore riskier. One bad year can wipe out multiple years of gains. Meanwhile, the money you collect as interest has already been paid, and as you can see from the calculator, the interest is front loaded, meaning the majority of it is paid at the beginning of the loan. So even with the probability of a default wiping out the remainder that's owed, it's still a much safer investment.
Why aren't these practices considered criminal?
Because the people and organizations with the capital to loan out millions of dollars for house purchases are the ones who make the rules.
What is your proposed alternative system? All of this is just an interest rate applied to an outstanding balance. Many less people would own a house without such an option.
Yeah my parents are vehemently against borrowing money except for a mortgage. Otherwise, how will you save several hundred thousand dollars or more to buy a house in full? Most people can't do that, even over decades.